January 31, 2024 10:47 GMT
Frait Flags Openness To Cutting Rates By More Than 50bp, Koruna Takes Hit
Reuters run comments from CNB Deputy Governor Jan Frait, who puts the prospect of an outsize rate cut on the table ahead of next week's Bank Board meeting, citing subdued recovery in household demand.
- In Frait's view, the anticipated January repricing of goods and services did not bring any major shocks and the outlook for economic growth and inflationary pressures is weakening, which opens the door to "some bolder, stronger action" on rates.
- Frait says that he is ready to back a 50bp rate cut and could potentially support a larger move next week in order to get rates to a more appropriate level before moving to a discussion of further "fine-tuning".
- The market had expected next week's decision to be between a 25bp and a 50bp cut, but Frait's comments suggest that the Board will debate other options as well, as the central bank's easing cycle garners steam.
- Tomas Holub said earlier this week that he was "open" to discussing a 50bp rate reduction next week, which was widely interpreted as a relatively dovish position, but Frait's remarks shed some more light on sentiment within the Bank Board.
- EUR/CZK shot higher in reaction to Frait's comments and last sits +0.104 at 24.863, while Czech FRAs have lost altitude across the curve.